MBI - MBIA Inc.

[muscleman]

Judge Kapnick says the ruling is "getting there". 

 

http://www.reuters.com/article/2012/12/06/mbia-restructuring-idUSL1E8N6FKO20121206?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43

 

Nice! I read from here that Kapnick is from the Supreme court? Does that mean her ruling is final and BAC cannot appeal to a higher level court?

[valuecfa]

 

I think if Countrywide had been bought by nobody at all (just going directly to bankruptcy), then the managers at MBI would be living in a completely different reality (of entirely their own making).  They would not be singing this "oh poor me" tune at all.

 

Assuming that Countrywide did not misrepresent their reps & warranties, then this would be true (IMO). I think their "poor me" routine has validity if they were defrauded by the contracts they insured.

[Kraven]

Judge Kapnick says the ruling is "getting there". 

 

http://www.reuters.com/article/2012/12/06/mbia-restructuring-idUSL1E8N6FKO20121206?type=companyNews&feedType=RSS&feedName=companyNews&rpc=43

 

Nice! I read from here that Kapnick is from the Supreme court? Does that mean her ruling is final and BAC cannot appeal to a higher level court?

 

Alas, no.  An oddity of the nomenclature used in the NY court system is that the NY Supreme Court, unfortunately, is the trial court.  The equivalent of a district court. 

[ERICOPOLY]

 

I think if Countrywide had been bought by nobody at all (just going directly to bankruptcy), then the managers at MBI would be living in a completely different reality (of entirely their own making).  They would not be singing this "oh poor me" tune at all.

 

Assuming that Countrywide did not misrepresent their reps & warranties, then this would be true (IMO). I think their "poor me" routine has validity if they were defrauded by the contracts they insured.

 

 

Oh, yes, the claims are valid.  I totally agree with you (no sarcasm).

 

I'm saying that MBIA was so reckless as to get this exposed to a company that could never pay all of it's legal claims (on it's own).

 

Enter the angel of Ken Lewis -- MBIA is saved.

 

Rewrite history so that Countrywide is never bought out and thus MBIA is circling the drain.  They ran their business in such a way that they were far too exposed to a company that was in it's own right far to reckless.  Thus, who was also far too reckless?

 

 

EDIT:  In short there really ought to be some moral hazard lesson to be taught to MBIA here.  There is risk in not bothering to sample the assets your are underwriting huge amounts of insurance against.  Reps and warrant claims against a potentially insolvent bankrupt company should be the history, for that's what MBIA should have foreseen as a possibility.  They must have been dancing in the streets when BofA saved Countrywide.  Now they pretend to hate BofA.

[ShahKhezri]

Rewrite history and BAC wouldn't be here if it wasn't for the kindness of the fed.

[ERICOPOLY]

Rewrite history and BAC wouldn't be here if it wasn't for the kindness of the fed.

 

BAC's in-house underwriting survived the crisis.  It's a relatively large part of my investment thesis when I reason that the people they've got are generally good enough to keep us from another crisis (just watch out for the big acquisitions). 

 

[MYDemaray]

Rewrite history and BAC wouldn't be here if it wasn't for the kindness of the fed.

 

BAC's in-house underwriting survived the crisis.  It's a relatively large part of my investment thesis when I reason that the people they've got are generally good enough to keep us from another crisis (just watch out for the big acquisitions).

 

Yes -- they were toward the end of the line in a line of dominos....but I think Ericopoly's point stands.  Treating these entities as separate -- BAC, Countrywide and Merrill -- is useful from a legal standpoint (who knows if the court will see it that way).  They were separate when these contracts were conceived and executed. The fact they are now all under the same umbrella just complicates the facts, and certainly makes for better theater and political positioning for MBIA.

[PlanMaestro]

BAC's in-house underwriting survived the crisis.  It's a relatively large part of my investment thesis when I reason that the people they've got are generally good enough to keep us from another crisis (just watch out for the big acquisitions).

 

As Eric says, BAC's underwriting was as good as anyone else of the big banks and their leverage too. If Moynihan's capital actions speak louder than his words … move on Jamie Dimon, there is a new banker in town.

 

RR: ups, this is the MBIA board. Sorry.

[ERICOPOLY]

 

Yes -- they were toward the end of the line in a line of dominos....

 

And Countrywide was one of the first in line to fall.  Those Reps and Warranties had very little value whatsoever at the time the contracts were inked. 

 

[JRH]

http://mbibaclitigtion.blogspot.com/2012/12/is-bank-of-america-looking-to-round-up.html

 

Unless another, more plausible explanation surfaces, I think this theory passes the smell test.  Line it up in the "promising speculation" column.

[MYDemaray]

Has it been discussed here -- why doesn't BAC just offer to buy MBIA in its entirety, structure it bankruptcy remote, cease all litigation, then see what it can salvage from National and spin it back out?  Seems like this could be less expensive than some of the settlement numbers being tossed around.  Anyone?

[valuecfa]

http://mbibaclitigtion.blogspot.com/2012/12/is-bank-of-america-looking-to-round-up.html

 

Unless another, more plausible explanation surfaces, I think this theory passes the smell test.  Line it up in the "promising speculation" column.

 

My thoughts exactly.

[Grenville]

http://mbibaclitigtion.blogspot.com/2012/12/is-bank-of-america-looking-to-round-up.html

 

Unless another, more plausible explanation surfaces, I think this theory passes the smell test.  Line it up in the "promising speculation" column.

 

My thoughts exactly.

 

Is there anything stopping BAC from buying some common stock and adding it to the mix of securities it returns to MBIA in a settlement. Common shares are much cheaper than debt in terms of value to MBIA in a settlement (if book value is an indicator). On the other hand debt has a more defined value.

[valuecfa]

If you have the time to read it there has been a large file dump in the MBIA vs Countrywide case over the past 48 hours

[muscleman]

If you have the time to read it there has been a large file dump in the MBIA vs Countrywide case over the past 48 hours

 

Where is that? From the company website, the latest file for legal proceedings is on the 11/28/2012.

[valuecfa]

If you have the time to read it there has been a large file dump in the MBIA vs Countrywide case over the past 48 hours

 

Where is that? From the company website, the latest file for legal proceedings is on the 11/28/2012.

 

from the new york court's website: http://iapps.courts.state.ny.us/webcivil/ecourtsMain

[muscleman]

If you have the time to read it there has been a large file dump in the MBIA vs Countrywide case over the past 48 hours

 

Where is that? From the company website, the latest file for legal proceedings is on the 11/28/2012.

 

from the new york court's website: http://iapps.courts.state.ny.us/webcivil/ecourtsMain

 

Hmm... I entered that website and clicked search for MBIA or CountryWide, but I can't find any relevant info. Could you please tell me how to do that?

[valuecfa]

If you have the time to read it there has been a large file dump in the MBIA vs Countrywide case over the past 48 hours

 

Where is that? From the company website, the latest file for legal proceedings is on the 11/28/2012.

 

from the new york court's website: http://iapps.courts.state.ny.us/webcivil/ecourtsMain

 

Hmm... I entered that website and clicked search for MBIA or CountryWide, but I can't find any relevant info. Could you please tell me how to do that?

 

From the link above, click webcivil supreme, then party search then type mbia as either a plaintiff or defendant depending on which case you would like to review.

[muscleman]

If you have the time to read it there has been a large file dump in the MBIA vs Countrywide case over the past 48 hours

 

Where is that? From the company website, the latest file for legal proceedings is on the 11/28/2012.

 

from the new york court's website: http://iapps.courts.state.ny.us/webcivil/ecourtsMain

 

Hmm... I entered that website and clicked search for MBIA or CountryWide, but I can't find any relevant info. Could you please tell me how to do that?

 

From the link above, click webcivil supreme, then party search then type mbia as either a plaintiff or defendant depending on which case you would like to review.

 

Thanks a lot! I thought they are documents regarding recent developments. They are all historical documents for 2008 and 2009.

[muscleman]

Hi valuecfa,

    I started a thread for AGO but no one replies. Since you owned AGO before, could you please tell me if you know if AGO's subsidiaries are bankruptcy remote, like MBIA right now after the solicitation?

    http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ago-assured-guaranty-(comparing-with-mbi-side-by-side)/

[valuecfa]

Hi valuecfa,

    I started a thread for AGO but no one replies. Since you owned AGO before, could you please tell me if you know if AGO's subsidiaries are bankruptcy remote, like MBIA right now after the solicitation?

    http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ago-assured-guaranty-(comparing-with-mbi-side-by-side)/

 

AGO LTD (the parent company) has guaranteed all of AGO subsidiaries' debt securities.

[Kraven]

Hi valuecfa,

    I started a thread for AGO but no one replies. Since you owned AGO before, could you please tell me if you know if AGO's subsidiaries are bankruptcy remote, like MBIA right now after the solicitation?

    http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ago-assured-guaranty-(comparing-with-mbi-side-by-side)/

 

I have no idea about AGO, but note that "bankruptcy remote" is a term of art.  MBIA is not bankruptcy remote, they have simply lessened their chances (perhaps) of being put into bankruptcy via a cross default to MBIA Corp, their structured sub.  But they are in no way bankruptcy remote.  Bankruptcy remote is typically used to refer to a special purpose entity that has been set up and arranged so that it operates its business in a manner that bankruptcy is very unlikely.  It is not impossible by any means and there have been bankruptcies of special purpose entities.

 

So I think you're asking the wrong question.  In MBIA there was a specific circumstance where they had 2 subs, one "alive" and one potentially "dead".  Due to what was probably a drafting error, the credit agreement referred to the "dead" sub in terms of a cross default.  As I said, I have no idea about AGO, but unless they have the same kind of situation, which I don't believe they do, it's all a moot point.  AGO is theoretically just as likely or unlikely to go bankrupt as anyone else.  Hope this helps.

 

Further note:  In reading through your post again, I see you asked if "AGO's subsidiaries are bankruptcy remote, like MBIA right now".  If you meant to say are AGO's subsidiaries bankruptcy remote like MBIA Corp, that would also not be correct.  MBIA Corp (the structured sub) is not a bankruptcy remote entity.  The consent simply made any default by then not a cross default to MBIA Inc's (the parent's) debt.  This was to protect the parent, not the sub.  The sub is just as likely to be insolvent or not as it was before the consent.

[muscleman]

Hi valuecfa,

    I started a thread for AGO but no one replies. Since you owned AGO before, could you please tell me if you know if AGO's subsidiaries are bankruptcy remote, like MBIA right now after the solicitation?

    http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ago-assured-guaranty-(comparing-with-mbi-side-by-side)/

 

I have no idea about AGO, but note that "bankruptcy remote" is a term of art.  MBIA is not bankruptcy remote, they have simply lessened their chances (perhaps) of being put into bankruptcy via a cross default to MBIA Corp, their structured sub.  But they are in no way bankruptcy remote.  Bankruptcy remote is typically used to refer to a special purpose entity that has been set up and arranged so that it operates its business in a manner that bankruptcy is very unlikely.  It is not impossible by any means and there have been bankruptcies of special purpose entities.

 

So I think you're asking the wrong question.  In MBIA there was a specific circumstance where they had 2 subs, one "alive" and one potentially "dead".  Due to what was probably a drafting error, the credit agreement referred to the "dead" sub in terms of a cross default.  As I said, I have no idea about AGO, but unless they have the same kind of situation, which I don't believe they do, it's all a moot point.  AGO is theoretically just as likely or unlikely to go bankrupt as anyone else.  Hope this helps.

 

Further note:  In reading through your post again, I see you asked if "AGO's subsidiaries are bankruptcy remote, like MBIA right now".  If you meant to say are AGO's subsidiaries bankruptcy remote like MBIA Corp, that would also not be correct.  MBIA Corp (the structured sub) is not a bankruptcy remote entity.  The consent simply made any default by then not a cross default to MBIA Inc's (the parent's) debt.  This was to protect the parent, not the sub.  The sub is just as likely to be insolvent or not as it was before the consent.

 

ThAnk u. I thought bankruptcy remote means that the parent corp has not guaranty the sub debt.

SO thanks to valuecfa, I know that the parent of Ago guarantees all sub debt, so in this view the structure is not As safe as Mbi. On the other hand, ago survived better in the crisis, so probably the underwritting is better.

 

[bmichaud]

http://www.businessweek.com/news/2012-12-12/bofa-seeks-to-knock-out-mbia-claims-tied-to-countrywide

 

 

[Kraven]

ThAnk u. I thought bankruptcy remote means that the parent corp has not guaranty the sub debt.

SO thanks to valuecfa, I know that the parent of Ago guarantees all sub debt, so in this view the structure is not As safe as Mbi. On the other hand, ago survived better in the crisis, so probably the underwritting is better.

 

Sure.  No, whether or not the parent has guaranteed sub debt isn't what determines bankruptcy remoteness.  In MBIA's case being successful with the consent may make them less likely than they were before to become bankrupt, but doesn't make them bankruptcy remote.  Bankruptcy remote is a concept used primarily in respect of special purpose vehicles.  There are various things that are done, all with the goal of making it as unlikely as possible that the entity would ever become bankrupt.  Think of the entity as essentially being brain dead.  No operating company can be bankruptcy remote in the true sense of the term.  In terms of whether AGO is less safe than MBIA or not, I can't speak to that.